Cryptocurrency exchange FTX is launching stock trading capabilities for its clients through its US division. The company, led by co-founder and billionaire Sam Bankman-Fried, said in an ad that its launch will begin in private beta mode for a select group of customers chosen from a waiting list before a full rollout in late 2022.
FTX, which is the second largest crypto exchange in the world, announces that it will offer “hundreds of publicly traded securities in the United States, including common stocks and ETFs”, including fractional shares in some titles.
Notably, FTX plans to route all orders through the Nasdaq rather than a third-party market maker. The exchange says it will not receive payment for order flow (PFOF), a method of order execution Robinhood has become famous for it involves the exchange receiving payment from market makers to direct orders as they see fit. This is a controversial way of netting trades as it often means the investor is not receiving their shares at the best possible price since the market maker is profiting from the spread.
Robinhood continues to use PFOF because it can generate substantial revenue from third-party market makers. FTX, on the other hand, will give up the benefits of its stock trading offering as it offers the service to users with no fees or commissions charged in exchange.
FTX also says it will allow users to fund their brokerage accounts on the platform with fiat-backed stablecoins such as USDC (these are different from algorithmic stablecoins like Terra (UST), which are backed by other cryptocurrencies and do not hold reserves in the traditional sense). The exchange says it will be the first to offer this capability, although users can also fund their accounts through standard means via wire transfers, ACH transfers and credit card deposits.
FTX will also not require customers to hold a minimum balance in order to qualify for the fee-free account, he said.
The announcement marks a pivotal moment in Bankman-Fried’s vision to expand FTX from an institution-focused platform with deep business roots to an exchange that meets the wide range of retail investor needs. Bankman-Fried revealed in a filing last week that he bought Robinhood shares worth 7.6% of the company, which could mark another step towards that end.
“What we ultimately want to deliver is a comprehensive financial services app,” Brett Harrison, president of FTX.US, told The Wall Street Journal in an interview.